State Sues Kickstarter Project That Earned $25K But Failed To Deliver

In what is believed to be the first consumer protection action taken by a state involving Kickstarter project, the attorney general for Washington state has filed suit against a company that raised $25,000 on the crowdfunding site but has allegedly failed to deliver anything to its backers or offer refunds.

The complaint [PDF] was filed earlier this week in King County Superior Court, naming a Nashville-based company and its president as defendants.

After reaching that level in only a few weeks, the operators of the campaign added new rewards options. Eventually, the campaign raised $25,146 from a total of 810 backers. The campaign stated that backers would receive their rewards for supporting the project in December 2012, but the state says that, as of April 2014, not one of those hundreds of supporters had received anything or been offered a refund.

The campaign’s comment board has hundreds of complaints from backers who did not receive anything. The creators of the campaign have not posted any updates online since last July.

Washington AG Bob Ferguson alleges that the operators of the campaign violated the state’s Consumer Protection Act by taking backers’ money then failing to either deliver what they had paid for or offer them refunds.

The suit asks the court to compel the company to issue refunds to the backers, along with imposing a penalty of up to $2,000 per violation. Even that only applies to the 31 Washington residents who backed the campaign, that still adds up to more than double the amount of money the campaign took in via Kickstarter pledges.

“Consumers need to be aware that crowdfunding is not without risk,” Ferguson said in a statement to the Seattle Times. “This lawsuit sends a clear message to people seeking the public’s money: Washington state will not tolerate crowdfunding theft.”

I am also not an expert on law – is there any legalese that says if you do business in that state, you’re subject to the business laws in that state and can be sued there? Accepting money via Kickstarter from that state is likely seen as doing business.

The Attorney General basically exists to protect consumers (well, partially, and the one relevant to this case). Since 31 of the “consumers” for this Kickstarter are in Washington, therefore it falls to the AG to file the suit on their behalf.